February quickly retreated toward targeted support ($2.600 and $2.700). After trading the low of the week($2.694) February recovered and developed a dramatic bout of short covering spiking to a high of $3.392 with exceptional volume. Having already traded a range of $.698…the widest range for any two days since the beginning of the collapse from the December ’22 high, February traded within Tuesday’s range ($2.884 – $3.392) for the balance of the first full week of ’23, but again finished the week with a substantial bid. February posted its highest close since the first Friday of November, just short of the resistance presented by the lower boundary of a range the current prompt traded in from April through October which includes the gap left on the February chart on November 6th $3.635 – $3.681 and February’s 40 – week SMA…which it failed at twice before breaking down. On a continuation basis prompt gas closed just below a band of weekly closing resistance between $3.330 and $3.473 ). The daily continuation gap is $3.407 – $3.452 and two standard deviations above the 20 – week SMA is $3.462. That represents a whole lot of areas to bring sellers back, Unless the prompt can extend its rally…as another strong weekly close suggests it will, after posting the highest daily close since 11/03 ($3.515), it is in danger of a short – term momentum divergence…and in any event is extremely short – term overbought. Expect selling.
Something that caught my eye and so I checked previous years and it failed to turned up any other year that there was anything close to the premium over March at February has at expiration. So, the question becomes whether February gives up much of that premium over its last nine trading days or March begins to catch up. Based on my comments and foregoing analysis of resistance, extension nearly two standard deviations above the twenty week and the extreme short – term overbought condition expect that February retreats from a challenge of the October highs to redefine support while March and the Q2 months begin to find more sponsorship.